Starbucks wanted to be the ‘third place.’ Now it’s speeding you out the door

[JohnS]

Once upon a time, Starbucks used to be a place to catch up with friends/family/acquaintances and you valued the barista writing your name on your cup. Nowadays, it seems those days are gone. If the Friends TV show was being made today, would they have that 'Central Perk' Cafe in the show?

Starbucks wanted to be the ‘third place.’ Now it’s speeding you out the door

By Nathaniel Meyersohn, CNN Fri July 19, 2024

Customers sitting down at Starbucks in Portland in 1998. Today, 70% of Starbucks orders are mobile and drive-thru. Herb Swanson/Portland Press Herald/Getty Images

New York CNN  — Years ago, some people would spend hours at Starbucks. Today, it’s a takeout counter. At many Starbucks locations, you’re lucky to find anyone sitting down.

Under Howard Schultz, Starbucks’ longtime leader, cafes were positioned as a “third place” between work and home, where people could linger for hours on plush purple armchairs, socialize and connect.

“If you look at the landscape of retail and restaurants in America, there is such a fracturing of places where people meet,” Schultz said in a 1995 profile of Starbucks for an industry publication. “There’s nowhere for people to go. So we created a place where people can feel comfortable.”

The idea of Starbucks as a third place became part of its corporate mythology. Starbucks aimed to create a welcoming environment for coffee drinkers and employees with comfortable seating, jazz music and the aroma of freshly-brewed coffee. Employees who brewed and served Starbucks coffee, whom Starbucks called baristas, handwrote customers’ names on their drink orders.

Howard Schultz positioned Starbucks as a "third place" between work and home. Stephen Brashear/Getty Images

By the time Michelle Eisen joined Starbucks in 2010 as an employee in Buffalo, New York, her store was always packed during the holidays with people meeting friends and family. She witnessed first dates and helped a customer’s propose to his spouse, writing “will you marry me?” on a cup.

“It was a cheerful, amazing thing to be part of it,” she said of working at Starbucks and forming close relationships with customers. “It’s why so many employees stayed for so long.”

Eisen has helped lead Starbucks Workers United, a group unionizing company stores.

But Starbucks’ business has transformed, and it has struggled to maintain its identity as that third place along the way.

Mobile ordering and drive-thru

Mobile app and drive-thru orders make up more than 70% of Starbucks’ sales at its approximately 9,500 company-operated stores in the United States. In some stores, customers complained online that Starbucks pulled out comfortable chairs and replaced them with hard wooden stools. Starbucks has also built pickup-only stores without seating. Machines that print customers’ names have replaced baristas’ handwriting on cups.

“Third place is a broader definition,” current Starbucks CEO Laxman Narasimhan said last year. The “classic definition of third place — it’s a box where I go to meet someone — it’s frankly not relevant anymore in this context.”

Starbucks’ sales in its home North America market dropped 3% last quarter. Schultz, who stepped down as Starbucks’ CEO (for a third time) and retired from Starbucks’ board of directors last year, wrote a lengthy message on LinkedIn in May about the company’s issues.

“U.S. operations are the primary reason for the company’s fall from grace. The stores require a maniacal focus on the customer experience,” he said. The company needs to “focus on being experiential, not transactional.”

Starbucks’ changes to its sit-down business model came in response to several trends — demand from customers for ordering coffee from their cars in drive-thru lanes or on their smartphones. The shift from a business serving hot coffee to one in which cold coffees, teas and lemonades make up more than half of sales. The Covid-19 pandemic, which forced cafes to shut indoor seating.

Starbucks built its first drive-thru in 1994. Tim Boyle/Newsmakers/Hulton Archive/Getty Images

Starbucks shifted to meet Wall Street’s demands, too. Starbucks found it could reduce labor costs and increase order volume by running a mostly drive-thru and take-away coffee business. Starbucks also found difficulties with being America’s third place and did not want to become the public space and bathroom for everyone, including people coming into stores who were homeless or struggling with mental health challenges on city streets. Starbucks has closed some stores and restricted bathroom access over safety concerns.

But by prioritizing speed — “throughput” in corporate parlance — Starbucks hurt the appeal of sitting down for coffee in stores, some critics say.

“Their success has not enabled them to retain what people originally found so attractive about the brand,” said Tom Cook, a principal at restaurant consultancy King-Casey who has worked with Starbucks. “It’s turned into a transaction business that has very little interpersonal interaction and engagement.”

Many Starbucks’ stores feel more like a fast-food restaurant than a coffee shop, Cook said. “They had this unique image and personality. That doesn’t exist anymore.”

‘Just another commodity product’

Starbucks’ shift from a sit-down shop to a primarily drive-thru and mobile pickup business has been gradual.

The company was hesitant to build out drive-thru stores during the 1990s, fearing they would take away from the third place appeal.

“We don’t want to become just another commodity product,” Starbucks finance chief Michael Casey said in the 1995 profile of the company. “The drive-thrus are a way for the converted to get their coffee a little quicker. It’s not the way we want people to discover the Starbucks experience.”

But Starbucks warmed to the option, finding that many customers preferred the convenience of drive-thrus on their way to work. By 2005, nearly 15% of Starbucks’ roughly 7,300 stores were drive-thru locations. For the first time that year, more than half of new Starbucks stores were drive-thru locations. Today, 70% of Starbucks locations have a drive-thru option.

Mobile ordering was another major step in Starbucks’ road to becoming primarily a take-away business.

In 2014, Starbucks debuted its mobile ordering system, which allowed customers to place pickup orders from their smartphones without having to interact with an employee. Mobile ordering also gave the company more data on consumers and helped push them to Starbucks’ loyalty program, benefiting Starbucks because loyalty members are its most profitable customers.

More than half of Starbucks' sales are cold drinks. Alex Wong/Getty Images

 

Mobile ordering surged during the Covid-19 pandemic in 2020, when Starbucks was required to temporarily close seating areas inside to customers to prevent the virus’ spread. Mobile orders jumped from 17% of sales in early 2020 to 26% the following year.

Although mobile ordering has been popular with busy customers and investors, growing to more than 30% of sales today, it has taken away from the sit-down experience, analysts say.

Starbucks baristas have complained about the crush of additional orders coming in from mobile orders and struggles to keep up with demand. People enter and exit stores more frequently, opening and closing the door and letting in the cold or heat.

Mobile ordering “commoditized” Starbucks by leading it to focus on order volume and efficiency, said Joe Pine, the co-founder of consultancy Strategic Horizons who wrote a recent article about Starbucks’ struggles in Harvard Business Review.

Starbucks’ menu changes also had an impact on this shift. Starbucks is less of a coffee shop today and more of an iced tea, coffee, energy drink and lemonade store, especially in the summer, when nearly 80% of the drinks are cold. Customers are less interested in lingering in an air-conditioned store sipping iced coffee, analysts say.

‘Reimagining the third place’

Starbucks says that it’s evolving its third place model from being a physical store to a feeling.

In 2022, Starbucks said it was “reimagining the third place” by investing $450 million in stores with new coffee-making equipment to improve efficiency for employees and improving Starbucks’ mobile ordering system. One of these improvements is called the Siren System, which is designed to cut down the amount of time it takes to make cold drinks.

Starbucks also is opening 2,000 new stores, including traditional Starbucks locations, pick-up stores, delivery-only stores and drive thru-only locations.

Eisen, the Starbucks employee in Buffalo, said Starbucks has tried to balance competing demands from customers who want to grab their orders and go and others who want to sit down.

The best way Starbucks can preserve the third place in the digital age is to improve ordering on the mobile app for both customers and workers, she said.

That means reducing wait times for customers and easing the burden on Starbucks workers so they have enough time to prepare drinks and acknowledge customers when they come in to pick up their orders.

“If the worker feels less stressed, they are able to greet the customer,” she said. “That allows the Starbucks worker and the customer to have that connection.”

Source: https://edition.cnn.com/2024/07/19/business/starbucks-mobile-orders-third-place/index.html

[laficion]

Starbucks is NOT real coffee if you like coffee. Sorry !!!!!!!

Guy

[chasy]

Great podcast on Starbucks. It’s called Acquired - Starbucks (they even interview Shultz). Even if Starbucks isn’t of interest, the Acquired podcast is perhaps the best series out there.

Their LVMH and Costco episodes are fascinating.

[Arabian]

Since I'm not a coffee drinker, I love Starbucks. Their iced 'coffee' drinks are unmatched by competitors. 

[Fuzz]

9 hours ago, laficion said:

Starbucks is NOT real coffee if you like coffee. Sorry !!!!!!!

Guy

GUY!!!! Nice to see you posting on the Forum again! Welcome back!!!

[GerardMichaelTX]

They don't serve alcohol like some of the better coffee shops in town and that's absolutely where they lost me.

[Edicion]

The model sounds like it's a lot based on Luckin Coffee in China. The trend there is mobile orders, and less physical shops. For a premium brand image (real or perceived), the traditional sit down place will always have a role, but to expand as rapidly as Luckin has done, they have to completely rethink their strategy. Opening 2000 stores means hole-in-the-wall, self-pickup or delivery. 

[laficion]

Thank you FUZZ, It's nice to be back.

Guy

[Puros Y Vino]

I used to meet friends, coworkers, etc at Starbucks many moons ago. This article definitely rings true. Once I traveled to Italy and other places in Europe did I understand that their coffee is .  I stopped going. Same with my wife. We just found the coffee was subpar. With that said, many baristas we've encountered have been great. Very friendly. The policy of handing out vouchers for free coffee for even the slightest mistake on an order was/is a brilliant goodwill gesture. It kept their staff from having to get into arguments (minus the totally unhinged customers who thrive off of that) and keep orders flowing. A free coffee now and then wouldn't really hurt their bottom line. I haven't had a Starbucks in about 10+ years. I'd rather go without coffee than drink theirs. 

Also, a shoutout to @laficion Great to see you posting again Guy. Hope you're doing well.

[Cigar Surgeon]

We've had a 'F Starbucks' policy in place for some time ever since they instituted a ban on outdoor smoking at all their locations.

There's tons of others reason to pass on them too, besides the fact their beans and roast level are very poor quality.

[JohnnyO]

On two occasions I ordered an Espresso for my wife and watched them brew it into a shot glass. Both times I told them that it was cold and it shouldn't be that way, their response was "that's how we do it." While in Europe pre-covid they wanted around 5 Euros for a coffee, local mom-n-pops about a Euro. It's not rocket science. John

[Ford2112]

Resist Corporate Coffee. I have found the only thing I can tolerate for Starbucks is their Americano. Lots of cream, it drowns out the over roasted burnt flavor of their beans. I am lucky to have a local amazing small batch coffee roaster near me. They are like family. Their single origin African coffees are as good as it gets.

[Fuzz]

Starbucks failed the first time they came to Australia, way back in the late 90s/early 2000s. I remember the first store in the Sydney CBD near Hyde Park. I had been to the States, but never had their coffee before, so gave it a try. First time, last time I ever drank their hot coffee (if I am forced out of necessity, I will drink a tea or frappuccino). Just terrible. Starbucks never adapted to the Aussie coffee culture, and failed spectacularly to the tune of USD100mil in less than a decade. Rapid expansion also attributed to their failure. Even McDonald's learned their lesson in the mid 90s and ditched the old percolator pots for espresso machines (McCafe). Though, they did try to automate with Espresso Pronto machines, but it failed so back to the barista made hot coffee.

Oddly enough, other coffee chains that makes similar Starbucks style cold coffee drinks have been a success (Gloria Jeans, Coffee Club, Jamaica Blue, Soul Origin, etc), probably because they serve decent hot coffee. Though, still not as good as an independent cafe.

[Fugu]

I am with Guy – don’t know what it is what they’re selling but it’s not coffee. Have never felt the urge to visit a Starbucks outlet, but was once ‘forced’ to buy their beans when on the road for work and forgot to pack my own (I would brew my own fresh coffee when on-site using the aeropress). Starbucks was the only whole-beans available at the grocer I was stopping by. Those beans are not normal beans but look like they had been artificially/chemically treated. The kind you find in decaf or infused/flavoured beans. Very glossy looking and extremely brittle on the grinder (using a hand grinder – such tells you immediately beans underwent some “treatment”). Checked the pack, but nothing mentioned. Needless to say, ditched the whole pack after just one brew…. undrinkable.

Edit: Just looked it up, I was so baffled I even took some pics

[BrightonCorgi]

What's interesting is that Starbucks roast a few different blends for Costco and they taste better than the Starbucks equivalent.

[Cigar Surgeon]

4 hours ago, BrightonCorgi said:

What's interesting is that Starbucks roast a few different blends for Costco and they taste better than the Starbucks equivalent.

Probably aren't roasting them to French levels which makes an enormous difference. 

We're lucky in Calgary we have a ton of third-wave coffee roasters who emphasize high quality beans and excellent roast profiles. 

[topdiesel]

Wow, that first image from 1998. Not one person vacantly staring at their phone. Almost everyone in that picture was drinking lemonade, not coffee. That swill has never been good. Wasn't good in the 90s, isn't good now.

[BrightonCorgi]

On 7/24/2024 at 4:59 AM, Cigar Surgeon said:

Probably aren't roasting them to French levels which makes an enormous difference.

The Kirkland French Roast tastes different than the Starbucks French Roast. Our Costco does offer a local roaster; Vermont Coffee Roasters. One of the most popular whole beans they sell. We buy a bag of ~4 different beans and rotate every two weeks in the grinder.

[Jack]

So my Starbuck journey started (and ended) with my son when he was in middle school and his Friday treat was some monstrous concoction that would be served in classic U.S. diner milkshake glass (if they used glass). Being over 20 years ago this was overpriced at something similar to six or seven dollars, but he loved the sugary, caffeinated confection. All of that fell apart during adolescence when other "things" took his fancy.

I actually keep a box of the little Starbucks "instant" packets around for lazy days or emergency-running-out-to-a-meeting use, and they are fine.

Other than that I have paid for two very nice E61 group head espresso machines with the money I've saved by not buying drinks from Starbucks.

I'm not attempting to say bad things about Starbucks. I do feel that if my life was so complicated that I can't steam a bit of milk and pull a double-shot then I need to perform some self reflection. I do not look down on those who choose the convenience.

As for Seattle-style coffee, I prefer a less intense roast.

[chasy]

So embarrassing, but my wife is an early riser (4am). Before Starbucks is open. So she’d door dash her latte, which if you’ve had experience with delivery food services ain’t cheap. I wanna say it was $14 for a coffee delivered. Anyway, I started to catch on and quickly made my typical case - “honey, do you think we’re rich?”

We are now Nespresso users and I can attest to the cost savings…

[Jack]

1 hour ago, chasy said:

So embarrassing, but my wife is an early riser (4am). Before Starbucks is open. So she’d door dash her latte, which if you’ve had experience with delivery food services ain’t cheap. I wanna say it was $14 for a coffee delivered. Anyway, I started to catch on and quickly made my typical case - “honey, do you think we’re rich?”

We are now Nespresso users and I can attest to the cost savings…

^=========This!

Apologies for the following thread hijack and no, I don't get a commission on any of this.

I'm an espresso/coffee idiot so I have a Nespresso Gemini CS100 "professional" (used and cheap off ebay takes different pods than the normal ones) along with the Nespresso CS20 milk foamer machine (again ebay and cheap). This duo cranks out a stupid (office size) amount of decent espresso on a daily basis.  But my ADD requires more.

I'm in California Norte (United States, Southern California, Pacific Plate, Ring of Fire, Pacific South West, etc.) and there is an Italian gentleman not far away (Santa Barbara?).  He runs Salvatore Espresso and his machines are all handmade.  Great stuff.  E61 groups now (older are not), vibration pumps, pour over or plumbed, auto or manual.

The yuppies (or whatever they are called these days - Gen google?) can't clean an espresso machine to they sell them cheap when they clog up. Two hours of work and they are good as new.

This link will expire soon, but it gives you an idea of used prices. Could certainly be had for 20% less. https://www.ebay.com/itm/166849482623

Anyway, I've had four of his machines. Four because friends and neighbors have bought them off my kitchen counter that often. Simple and easy to service and US$500 (plus shipping) used. This is for an E61 group head machine. I don't know of a better group head that isn't proprietary and much more expensive.

Kilo bags of Italian espresso off Amazon (yes, I believe that Roubusta should be in Espresso - I don't judge others) for US$20.

$15 a week at Starbucks starts to seem off if you are pushing towards espresso drinks. Even syrups and pumps are cheap if you extrapolate the cost over a year.

There are tons of other used espresso machines that didn't come by way of Williams Sonoma or a link from Nigella Lawson that are just as good.

[Dr vonPuffenberg]

I heard something recently that summed it up perfectly. Charbucks.

That being said, I think Starbucks put ‘good’ coffee closer to the forefront of American culture as opposed to the Folgers, etc of days past.  The downstream effect of that is so many more small, local coffee shops and roasters in towns big and small.  When traveling, I can usually track down a good cup almost anywhere now

[Boss Hog]

33 minutes ago, Dr vonPuffenberg said:

That being said, I think Starbucks put ‘good’ coffee closer to the forefront of American culture as opposed to the Folgers, etc of days past.

“The worst part of waking up is Folgers in your cup!” 🤣

[Cigar Surgeon]

12 hours ago, Boss Hog said:

“The worst part of waking up is Folgers in your cup!” 🤣

 

 

[Gamehawker]

I have been roasting my own coffee beans for over 20 years now (started originally with a modified FreshRoast Plus8) roast at a medium roast. 
I bought an Aillio Bullet R1 drum coffee roaster when they were doing a kickstart for $1,500 back in 2014 and finally received it in the Fall of 2016 after they started producing them. I absolutely love coffee roasting with it and roast 1 kilo coffee at a time synchronized with my laptop. 

https://aillio.com/?page_id=23112

I hate how Starbucks always over roast their beans and their coffee taste nasty. I call Starbucks “Charbucks” because they over roast their beans.